SFH for rental analysis

28 Replies

4br 2.5 bath. 1860 sf built in 1994 listed at 284k

needs roof and new siding(hardie plank) most likely

listed on zillow at 300k and i know zillow can vary form rgion to region but where I live, the zillow price is pretty damn accurate fom what ive seen. 

Im looking to buy cash, what offer should I put in? I dont want to go too low, then they won't respond. I want something close enough to where we can meet in the middle and I can buy for like maybe 250k or lower. 

Are you just asking what starting price you should offer in order to try to reach a $250K agreement (the title made it sound like more than that, but that's what the post indicates)?

Assuming so, it would depend on the comp value, the condition of the property (in addition to the roof and siding) and how long it's been listed.  Also, you say above that it's listed for $284K and then say it's on Zillow for $300K -- which is it?

it is way too high for a rental.  Can you get $3000/month in rent?  Find  3 $75,000 houses.

PS. I just sold a brand new 2,600 ft. 4 bed 3 bath 2 living areas on 1 acre for $295,000. In oklahoma. 

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Originally posted by @J Scott:

Are you just asking what starting price you should offer in order to try to reach a $250K agreement (the title made it sound like more than that, but that's what the post indicates)?

Assuming so, it would depend on the comp value, the condition of the property (in addition to the roof and siding) and how long it's been listed.  Also, you say above that it's listed for $284K and then say it's on Zillow for $300K -- which is it?

 its listed by the selling agent at 284k, but the zillow estimate is at 300k. By looking at the property, and in their disclosure statement, it needs a roof and new siding. its been listed for over 6 months now. 

Originally posted by @Arlan Potter :

it is way too high for a rental.  Can you get $3000/month in rent?  Find  3 $75,000 houses.

PS. I just sold a brand new 2,600 ft. 4 bed 3 bath 2 living areas on 1 acre for $295,000. In oklahoma. 

oh no... 75k wont get you an outhouse in seattle lol. SFH start at about 150k and thats extremely lower level. I buy most of my rentals at around 245k. and they give me 2k a month in rent.

Account Closed 

Then don't buy in seatle, buy in the outer areas where rentals make good money. It apparently works for you but the rent to cost ratio is not what I would want. I would think there are properties that will do a better ratio. Maybe harder to find but they are around.

I would also say that the average renter in the seatle area is not paying $2000 a month rent. The average wage for a working man does not support that type of rent. There has to be housing for the average folks. With moderate rent.

Originally posted by Account Closed:

 its listed by the selling agent at 284k, but the zillow estimate is at 300k. By looking at the property, and in their disclosure statement, it needs a roof and new siding. its been listed for over 6 months now. 

The Zillow estimate is meaningless.  You should find a local real estate agent who can tell you how much the property is worth.

From there, I'd probably start my negotiation at about 15% below the actual value of the property -- if it's valued at the listing price, that would be about $240K as a starting offer (though if it's been listed for 6 months at the $284K price, it's not worth that much).

Originally posted by @Arlan Potter :

@Kevin S. 

Then don't buy in seatle, buy in the outer areas where rentals make good money. It apparently works for you but the rent to cost ratio is not what I would want. I would think there are properties that will do a better ratio. Maybe harder to find but they are around.

I would also say that the average renter in the seatle area is not paying $2000 a month rent. The average wage for a working man does not support that type of rent. There has to be housing for the average folks. With moderate rent.

I completely agree. But I have 5 SFH and they all are rented for 2k a month, one is even at 2300 a month. mostly all the homes I bought at around 250k and are worth probably 300k or 350k now. all of them are 4 bed 2 bath or more. I find that people who rent 4 bd homes stay in that home for longer... I have tenants who have been with me for over 4 yrs. What do you think would be the ideal cost to rent ratio? thank yuo for your input. greatly appreciated.

Originally posted by @J Scott:
Originally posted by @Kevin S.:

 its listed by the selling agent at 284k, but the zillow estimate is at 300k. By looking at the property, and in their disclosure statement, it needs a roof and new siding. its been listed for over 6 months now. 

The Zillow estimate is meaningless.  You should find a local real estate agent who can tell you how much the property is worth.

From there, I'd probably start my negotiation at about 15% below the actual value of the property -- if it's valued at the listing price, that would be about $240K as a starting offer (though if it's been listed for 6 months at the $284K price, it's not worth that much).

 I agree that at times the zillow estimatwe is meaningless, but the area where I live, most homes sell at zillow price. I understand other areas of the country, thats not the case. I think its been on sale for so long because people are shying away from the roof and siding issue. It was listed at 289k and then 284k and then they delisted it. Im very interested in it because its what I buy. 4 bed 2.5 bath sfh that generate 2k a month. I usually make 20k a yr of each home. after insurance and taxes. repairs are very minimal(fingers crossed).  Also does that 15% rule apply even if im paying in cash? I usually get my properties at a huge discount because i pay cash. Also now that its unlisted, do you think I should go straight to the owner? 

@Account Closed
I happen to have a RE license in WA, do you want me to run you a CMA? I usually buy properties in the south--auburn, kent...where properties are a little cheaper compared to Seattle and still able to rent them out for 2K or more for a 4-bdrm house. --rey

Kevin I lived in Oklahoma City for 11 years and have 15 rentals there. What part of the city is the house in. That can make a big difference. My own personal residence is valued at $305,000 and rents for $1995 a month. However it's the worst performing house I own. You can buy houses very cheaply in OKC and I would look at something much cheaper there that would give you a much better cash flow.  You could buy two houses for that price in a decent neighborhood and probably get $2600 in rent. By the time you put a new roof on you will have spent a lot of money. 

I don't usually buy houses in that price range but I bought a triplex in April for $30,000 put $23,000 into it and get $1220 in rent a month. 

Just my 2 cents.

Sara

I would agree with @Sara Cunningham  at that price there are much better returns in other areas.  I too had a higher priced rental in LA for some time and while appreciation was great (like playing the lotto now though) the cash flow was awful.  

One possibility maybe they could only afford to sell at $280K+  If they bought relatively recently or at a high point, this may be the case.

If they can sell cheaper, it may be worth making an offer for under 250K. When it comes time to make an offer, assuming they are free of the listing agreement point out that a deal through the MLS will net them 6% less due to agent commissions. You may want to included a contingency for needed significant repairs in your initial offer. This will allow you to make an initial offer that is relatively high, rather than just something that will be disregarded as a low-ball offer.

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Kevin, OMG yes that is totally doable in OKC. In fact the lower the price of the property the better the return. However it depends on what kind of neighborhood you are buying in. I clear that on my triplex for example and I actually pay utilities on one portion of it. I also have a duplex which clears the same amount each month. I only paid $67,000 for that. On my big house I was clearing $200 a month.

I would agree with Sara, I have many investors I work with that are beating that easily.  

Listen to @Sara Cunningham   and @Rhett Tullis  on this... OKC is where it is at on investment deals these days!  We just closed on a nice triplex a few weeks ago for $65k and will be grossing $1775/month.  As far as the higher end... I am building NEW 3/2/2 homes around 1500'-1800' at $85' and getting them lease out at $1' in rents.  We can't keep them in stock!  I LOVE IT HERE!

Originally posted by @Sara Cunningham :

Kevin I lived in Oklahoma City for 11 years and have 15 rentals there. What part of the city is the house in. That can make a big difference. My own personal residence is valued at $305,000 and rents for $1995 a month. However it's the worst performing house I own. You can buy houses very cheaply in OKC and I would look at something much cheaper there that would give you a much better cash flow.  You could buy two houses for that price in a decent neighborhood and probably get $2600 in rent. By the time you put a new roof on you will have spent a lot of money. 

I don't usually buy houses in that price range but I bought a triplex in April for $30,000 put $23,000 into it and get $1220 in rent a month. 

Just my 2 cents.

Sara

 The house is in seattle, not oklahoma, I dont know where you got oklahoma from. lol. But great advice, I have a bad habit of staying in areas I know very well, I don't like to venture out too far, don't know the real estate climate out there. 

sorry we hijacked things here, us okies are a bit aggressive lol,  i would say that it is good to look outside of the higher priced areas.  I have found that the best cash flow is outside of those areas.  if you are banking on appreciation then keep on your current course.  

Sorry about that Kevin. A previous poster bought up Oklahoma and I assumed that's where you were talking about haha. However as you can see a lot of us jumped in with our comments about the area. I live in the DMV right now but don't invest here because of the high prices. Have thought about Delaware but nothing closer. 

JJ all of my properties will be paid off in 2017. All except what was my primary residence. I actually paid cash for the duplex but then did a refi on it to free up more money. They are in SW and SE Oklahoma City.